Retained Earnings (1/8/2019)
A)
Retained Earnings (1/8/2019) Dr 3150
Income tax expense Dr 1350
Cost of sales Cr 4500
B)
Retained Earnings (1/8/2019) Dr 21000
Income tax expense Dr 9000
Cost of sales Cr 30000
Accumulated Depreciation Dr 4500
Depreciation Expense Cr 3000
Retained Earnings (1/8/2019) Cr 1500
(10% x $30,000 p.a for 1.5 years)
Income tax expense Dr 900
Retained Earnings (1/8/2019) Dr 450
Deferred tax asset Cr 1350
The accounting for pre-acquisition and post-acquisition payouts is same. All of them are treated as post-acquisition dividends (Beams, 2018). The adjustment is made to the parent’s dividend revenue and the subsidiary’s dividends paid. The characterization of all payouts as post-acquisition dividends is difficult to defend theoretically, and the standard-setters took this decision based on practical considerations. The moment of realization cannot be immediately defined by comparison to the participation of an external entity since the asset is never on with a member of the group, rather staying inside the community and also being consumed by usage inside the collective. The value of the asset is thus indirectly defined by its use within the group, that is, in ratio to the consumption of the asset’s advantages inside the group (Santis, Grossi & Bisogno, 2018). The financial gain on sale within the group is then calculated in the same proportion as the asset’s depreciation. For example, if the transferable asset is depreciated on a regular basis over a ten year period, at a rate of 10% per year, the profit on sale is realized at 10% per year (Hadi, 2015).
Rent revenue Dr 175
To Cost of sales Cr 175
Emu ltd owns all of the shares of Cassowary ltd…
Dividend payable Dr 2000
To Dividend declared Cr 2000
Dividend revenue Dr 2000
To Dividend receivable Cr 2000
Dividend revenue Dr 4500
To Dividend paid Cr 4500
Sales revenue Dr 52000
To Cost of sales Cr 45000
To Machinery Cr 7000
Deferred tax assets Dr 2100
To Income tax expense Cr 2100
Accumulated depreciation Dr 700
To Depreciation expense Cr 700
Inventory Dr 300
To Loss on sale of current asset Cr 300
Income tax expense Dr 90
To Depreciation expense Cr 90
References:
Beams, F. A. (2018). Advanced accounting. Pearson.
Hadi, K. T. (2015). Consolidated financial statements.
Santis, S., Grossi, G., & Bisogno, M. (2018). Public sector consolidated financial statements: a structured literature review. Journal of Public Budgeting, Accounting & Financial Management.
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